High court to hear Andersen

Accounting firm seeks reversal of 2002 conviction

The Andersen accounting firm has not conducted a single audit or prepared a tax return in more than two years, but its legal battle to overturn its criminal conviction lives on.

The U.S. Supreme Court agreed Friday to consider whether Andersen broke the law when it destroyed thousands of documents and e-mails related to its audit of Enron Corp., which filed for bankruptcy in December 2001.

The court's decision to hear the case was a victory for Andersen, after a federal appeals court in Texas upheld its conviction in June. In 2002, a federal jury in Houston found the company guilty of obstructing the federal government's investigation of Enron.

"The firm is pleased that the Supreme Court has agreed to consider its case, given the importance of the legal issues and the potential impact on businesses and individuals in the United States," said Patrick Dorton, an Andersen spokesman.

The high court is expected to hear arguments in April.

The Chicago-based firm is no longer in the accounting business. But a Supreme Court reversal of its conviction would boost its defense in more than 100 pending civil suits against Andersen and its partners that seek billions of dollars. The case also gives the company another chance to partially restore its once golden reputation.

The government has a lot at stake too. The Andersen conviction was a significant victory in the Bush administration's efforts to root out corporate fraud and restore investors' faith in the markets.

The Department of Justice declined to comment on the court's decision.

At issue in Andersen's appeal is whether U.S. District Judge Melinda Harmon erred in her instructions to the jury. Andersen argues that she too broadly defined what constitutes obstruction of justice.

Her instructions, the company said in court documents, led the jury to convict the company for encouraging employees to comply with its legal document retention policy. The policy called for workers to eliminate duplicates, drafts and notes once an audit was complete but was not intended to thwart a federal investigation, Andersen said.

"Arthur Andersen did not commit a crime," the company wrote in its appeal.

One of Andersen's in-house lawyers, Nancy Temple, reminded employees of the document policy on October 12, 2001, just days after Enron had reported a massive write-off. A few weeks later the Securities and Exchange Commission subpoenaed Andersen for documents related to Enron.

In between, Andersen's Enron team ended up "destroyed nearly two tons of paper and tens of thousands of e-mails," acting U.S. Solicitor General Paul Clement, the administration's top courtroom lawyer, said in a court filing.

Prosecutors later accused Andersen of persuading its employees to purge and shred company records to impede the SEC investigation. The indictment was the beginning of the firm's collapse as clients fled in droves.

Andersen, once the world's fifth-largest auditor with 85,000 employees, began selling offices and practices. It now has fewer than 200 employees, primarily attorneys tending to lawsuits.

The federal appeals court agreed with Harmon's interpretation of the law. But other appellate courts have ruled more narrowly in cases involving obstruction, Andersen said in court documents, creating a conflict that the Supreme Court must resolve.

The case is being watched closely by the business community because many companies have routine document retention policies. The U.S. Chamber of Commerce and the Washington Legal Foundation have already filed friend-of-the-court briefs in support of Andersen.

So has the National Association of Criminal Defense Lawyers, which argues that a broad characterization of "obstruction" could unfairly punish criminal attorneys who advise their clients to withhold evidence in legal ways.